Peace Products Inc. Peace Products Inc. uses process costing. The following information was available for the current year:
Refer to the Peace Products Inc. information above. If Peace uses the first-in, first-out (FIFO) method of computing equivalent units and assigning product costs, how many total equivalent units were completed in the current period?

Question

Peace Products Inc. Peace Products Inc. uses process costing. The following information was available for the current year:
 Refer to the Peace Products Inc. information above. If Peace uses the first-in, first-out (FIFO) method of computing equivalent units and assigning product costs, how many total equivalent units were completed in the current period?

Quizplus · Accepted Answer

Using the FIFO method, we calculate equivalent units separately for units completed and units still in process. For units completed in the current period, we have:

Direct materials: 40,000 units x 100% = 40,000 equivalent units
Conversion costs: 40,000 units x 80% = 32,000 equivalent units

For units still in process at the end of the period, we have:

Direct materials: 4,000 units x 50% = 2,000 equivalent units
Conversion costs: 4,000 units x 30% = 1,200 equivalent units

Total equivalent units = Completed equivalent units + Ending equivalent units
Total equivalent units = 40,000 + 32,000 + 2,000 + 1,200
Total equivalent units = 37,600